Fine Is $95 Per Adult or 1% of Family Income, Whichever Is Greater

About 150 million taxpayers are expected file returns this tax season, said Mark Mazur, assistant secretary for tax policy at the Treasury Department. The filing process this year is expected to be trickier because Americans will in some cases have to pay a penalty or get smaller refunds because credits they received to offset insurance premiums were too large.

Up to 20% of tax filers—or about 30 million—who weren’t insured for most or any of last year will likely request and receive an exemption from the penalty, officials said. Many exemptions can be applied for during the tax-filing process.

Government agencies are encouraging Americans to file electronically and are providing filers information via email, phone and text messages. They are also offering support tools on the Internal Revenue Service and other federal websites.

The health law requires almost all Americans to have coverage or pay a penalty, with some exemptions. Some 2% to 4% of tax filers are expected to have to pay the fine, which is $95 per adult or 1% of family income, whichever is greater.

Plan for 529 Tax Dropped

The move followed a public call by House Speaker
John Boehner
(R., Ohio) for the White House to withdraw its plan. Calls also came privately from leaders of the president’s own party.

House Minority Leader
Nancy Pelosi
(D., Calif.) argued for dropping the plan in conversations with senior administration officials aboard Air Force One, as she flew with the president from India to Saudi Arabia, said a person familiar with the matter.

A White House official said late Tuesday: “Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision.”

Ahead of the Jan. 20 State of the Union address, Mr. Obama proposed a set of tax changes aimed at boosting incomes for low- and middle-income households, including expanded availability of a break known as the American Opportunity Tax Credit, which provides as much as $2,500 per student for higher-education expenses.

To offset the cost of those plans, the White House plan would have narrowed or ended several other breaks, including tax-free distributions from 529 accounts, which disproportionately benefit higher-income households, according to administration officials.

The administration said it will continue to push for expanded tax credits for higher-education costs, as well as other breaks for lower- and middle-income households.

—John D. McKinnon The Wall Street Journal

End to Tricare Proposed

A special commission looking at Pentagon spending called for scrapping the centerpiece of the military health-care system and trimming guaranteed retirement benefits for career officers, as part of a broad plan that could save the Defense Department billions of dollars.

After 18 months of research, the independent commission concluded that the Pentagon’s pay and benefit system “is fundamentally sound and does not require sweeping overhaul.” But the 280-page report lays out a series of charged changes that are certain to face strong resistance in Washington.

The biggest savings would come from replacing the Defense Department’s primary health-care system, known as Tricare, with an alternative that would allow three million people—primarily veterans and military family members using the services—to enroll in private plans. The report also calls for retaining the costly Tricare for Life services used by nearly two million people.

The commission also recommended revamping the retirement system to trim guaranteed benefits for career military personnel who serve 20 years. The report recommends automatically enrolling military personnel in a 401(k)-style system and offering bonuses for those who stay in the service more than 12 years.

—Dion Nissenbaum The Wall Street Journal

Drive Carefully

The Justice Department has been building a national database to track the real-time movement of vehicles around the U.S., a secret program that scans and stores hundreds of millions of records about motorists, say officials and government documents. The primary goal of the program, run by the Drug Enforcement Administration, is to combat drug trafficking, according to one document. But the database is being used to hunt for vehicles associated with other crimes. , from kidnapping to rape, say people familiar with the matter.

Officials have publicly said that they track vehicles near the border with Mexico to help fight drug cartels. What hasn’t been previously disclosed is that the DEA has spent years working to expand the database “throughout the United States,’’ according to an email reviewed by The Wall Street Journal.

Many state and local law-enforcement agencies are accessing the database for a variety of investigations, according to people familiar with the program, putting a wealth of information in the hands of local officials who can track vehicles in real time on major roadways.

The database raises new questions about privacy and the scope of government surveillance. The existence of the program and its expansion were described in interviews with current and former officials, and in documents obtained by the American Civil Liberties Union through a Freedom of Information Act request and reviewed by The Wall Street Journal. It is unclear if any court oversees or approves the intelligence-gathering.

The Justice Department says the program complies with federal law. “It is not new that the DEA uses the license-plate reader program to arrest criminals and stop the flow of drugs in areas of high trafficking intensity,’’ a spokesman said.